BANGKOK, Aug 25 (Reuters): The Thai military government has approved a plan to sell its 200,000 tonnes rubber stockpile, a senior government official said on Monday, aiming to cut storage costs and ending a stock overhang that has weighed on prices.
Traders said the move by the world's biggest rubber exporter could help stabilise global rubber prices that have fallen more than 25 per cent this year, although a pick-up was unlikely.
Thailand, which normally exports 250,000-300,000 tonnes of rubber a month, built up the stockpile during a price intervention scheme to support farmers from October 2012 to May 2013.
"This overhang of stocks has kept pressure on prices for such a long time. We are about to cut it off to reduce this negative factor which keeps pressure on prices," Dumrong Jirasutas, head of the Department of Agriculture told Reuters.
Dumrong declined to say if the 200,000 tonnes would be sold at once or reduced gradually, but said the government aimed to sell the rubber at close to current market prices.
Benchmark sixth-month Tokyo rubber futures for January delivery were up slightly at 203.0 yen per kg in early Asian trade.
"Prices have stopped falling after players see a clear signal from the Thai government. But the upside is likely to be limited as there is no sign of big demand that would help support prices," said a Tokyo-based dealer.
Prices have tumbled in recent years, with benchmark Thai smoked rubber sheet (RSS3) being offered on Monday at $1.85 per kg on Monday, down from a record $6.40 per kg in 2011, due to concerns about oversupply and weak demand from top consumer China.
Thailand's military government in June decided to shelve a plan by the previous administration to sell 200,000 tonnes of rubber from stocks, focusing instead on measures to increase domestic consumption to shore up prices.
However, the sale plan was given the green light after a committee advised the government that the rubber was deteriorating in quality in the stockpile, and was attracting high storage costs.
Prices have risen slightly since June, but are still below prevailing levels in 2012-13 when the government agreed to pay growers 10 per cent above market prices for their rubber.
Benchmark prices ranged between 243 yen and 337 yen per kg during the price support scheme, compared with a trading range of 190 yen to 220 yen over the past four months.
